With focus on economic development, there is an increasing focus on supporting operators of small and medium scale enterprises so that they can compete favourably, writes Peter Uzoho
Some Nigerian financial institutions have continued to exhibit an increasing reliance on income generation from non-core areas of business to overcome challenges in the economy.
The tough operating environment that was occasioned by the countryâ€™s slide into economic recession had put some strain on the bankâ€™s liquidity due to the rise in non-
But despite the challenging and fiercely competitive environment, Fidelity Bank Plc has continued to trudge on as its financial intermediation role is being felt in almost all sectors of the economy. Most especially, the bankâ€™s support for micro, small and medium sized enterprises (MSMEs) shows its commitment to nation-building and Nigeriaâ€™s economic development.
The bank which reported a solid financial performance in the first quarter of 2017, posting an appreciable growth in its profit and gross earnings for the period ended March 31, 2017, has bright prospects of delivering improved numbers this year due to the improving macro-environment.
Fidelity Bankâ€™s unaudited result released at the Nigerian Stock Exchange (NSE) had shown that the bankâ€™s gross earnings rose by 18.8 per cent from N34.4 billion in March 2016 to N40.8 billion for the corresponding period in March 2017. Similarly, Fidelity Bankâ€™s profit before tax in the period surged by 20.5 per cent from N4 billion in 2016 to N4.8 billion in 2017, just as it recorded a growth in net interest income, deposits, loans and other performance indices.
Speaking on the results, Fidelity Bank CEO, Mr. Nnamdi Okonkwo had said the double digit growth in earnings and profit underscored the disciplined execution of the bankâ€™s medium-term strategy and a business model that enables it to continue to deliver improved performance in line with its 2017 financial year targets.
â€œGross earnings growth was driven by a combination of increased yields on earning assets and an absolute growth in the volume of earning assets which led to a 24.1 per cent year-on-year (y-o-y) growth in interest income,â€ he said.
The Fidelity Bank helmsman also spoke on the impact of the bankâ€™s efforts at reducing operating cost.
â€œOur cost optimisation initiatives continued to deliver cost savings, as total operating expenses declined y-o-y by 10.4 per cent to N14.4 billion, this was driven by a decline in over 60 per cent of our operating expense lines in Q1 2017.
â€œWe will continue to optimise our cost profile without impacting service delivery through the disciplined execution of the initiatives from our recently completed business optimisation project,â€ he explained further.
Ranked amongst the top Nigerian lenders, Fidelity Bank has a strategic retail distribution network with a presence in the major cities and commercial centres across the country.
Rising from the recent rebranding exercise, the bank has become one of the most visible bank brands in Nigeria, gaining accolades and recognition for its superior e-banking products and services and promoting small businesses.
Support for SMEs
Fidelity Bankâ€™s SME financing strategy is delivered through a multi-faceted approach that includes robust business advisory, practical handholding and guidance of aspiring and existing entrepreneurs to building sustainable businesses.
Globally, access to finance is a critical success factor in the growth and development of micro, small and medium enterprises (MSMEs).
Available statistics show that in developed countries of the world, MSMEs are the major drivers of growth in their economies.
The existence of an environment that is conducive to doing business is very important in this regard and partly responsible for this development in developed countries.
That is why Nigeria cannot afford to be an exception if she intends to be in the top 20 economies of the world by year 2020 according to Vision 20:2020, the nationâ€™s economic blueprint.
That was why in order to chart a course towards analysing the barriers MSME face in the country, Fidelity Bank has continued to expand its support for MSMEs across the country.
Financing opportunity for MSMEs
To the Executive Director, Lagos and South-west, Fidelity Bank, Mrs. Nneka Onyeali-Ikpe, the focused on MSMEs cannot be overemphasised because they are the engine of growth in the economy.
She further explained that figures clearly show that MSMEs should be the focus going forward. But Onyeali-Ikpe noted that one of the barriers to lending MSMEs face is insufficient documentation.
â€œThe funds we are giving out are depositorsâ€™ monies and we need to account for them. So, for a customer to qualify for an SME loan, you need to have a bankable transaction.
â€œThat is, you must have a clear picture of what you want to do. You have to know your market, the set of people that demand your goods or services, you must have your financials, a stable management and the company must be registered. Of course, you must have an account with Fidelity. We have short-term, medium-term and long-term funds to lend,â€ she added.
On his part, Okonkwo, who said the financial institution supports over 500,000 MSMEs annually, reiterated that Fidelity Bank has a Managed-SME unit.
â€œWe do not want to bank SMEs haphazardly, and we therefore created a Managed-SME division. That division focuses on providing solution to challenges faced by SMEs through a multi-faceted approach.
â€œThis is an inspiration for everybody to know that you can start small and become a Dangote of your own in the future. We have a major component in our managed SME unit that helps entrepreneurs with business management skills. A lot of people may have capital and other things required to start a business, but they donâ€™t know how to go about it. So, we created this unit to provide support services, complemented by a host of other resources that we provide,â€ he added.
Accessing CBNâ€™s MSME fund
Owing to the bankâ€™s strong focus on MSMEs, it has so far disbursed about N2.2 billion out of the Central Bank of Nigeriaâ€™s (CBNâ€™s) N220 billion micro, small and medium size enterprises development fund (MSMEDF).
Also said the bank has also received repayment of N400 million, pointed out that the CBN is very committed to the disbursement of the fund.
The bank is a key partner in the central bankâ€™s quest to promote MSMEs.
Mr. Akinola Bamiji of the Development Finance Department, Central Bank of Nigeria, urged operators to take advantage of the N220 MSME development fund that had been put in place by the central bank. According to him, the central bank had also put in place policies and initiatives to support SMEs.
Eligible enterprises to be financed by the fund include agricultural services, schools, restaurants, artisans, cottage industries, trade and general commerce and all other agencies that can repay. The fund is majorly channelled through Participating Financial Institutions (PFIs) like microfinance banks, commercial banks and development finance institutions.
At the launch of the fund, the CBN had stated that it was designed to further enhance access to finance by MSMEs with the following major objectives: provide wholesale financing windows for PFIs; improve the capacity of the PFIs to meet credit needs of MSMEs; provide funds at reduced cost to PFIs; enhance access of women entrepreneurs to finance by allocating 60 per cent of the fund to them; and improve access of NGOs/ MFIs to finance.
The CBN official added: â€œTo address the challenge of funding by MSMEs, we put in place the N220 billion MSME fund. We have participating financial institutions that disburse the funds for us. For commercial and development banks, they have the capacity to access as high as N50 million as a single obligor, but they cannot do it on group basis. They have to identity a project and the owner of the project must come with a bankable business plan and with that the bank can access the fund from the CBN.
â€œBut we have realised that most of the entrepreneurs donâ€™t have what it takes to take their business to the next level and because of that, we have put in place an entrepreneur development centre in each geo-political zone of the country.â€